Rune Christensen, founder of MakerDAO, has asked members of the autonomous organization (DAO ) to “seriously think” about preparing for depegs of their Dai ( DAI) stablecoins from the United States.
In light of recently announced sanctions against crypto mixer Tornado cash, the founder made the following comments to MakerDAO’s discord channel on Thursday: “Unfortunately, more severe than I thought.” He also said that they should prepare for depeg their native stablecoin DAI to the USD to avoid any risks’s relating to Circle’s recent freeze of sanctioned USD Coin ( USDC).
“We should seriously think about preparing for a USD depeg. It’s almost certain that it will happen, and it is possible to prepare for it with enormous amounts of money.
Monday was the official ban day by the U.S. Office of Foreign Asset Control . 44 USDC addresses were linked to the Tornado Cash platform and placed on the list of Specially Designated Nationals.
USDC issuers Circle frozen $75,000 of the stablecoin that was linked to the 44 sanctioned addresses following the move.
rune: we should seriously consider depegging from usd pic.twitter.com/HBMrPH7LrW
— banteg
August 11, 2022
MakerDAO’s DAI has around 50.1% collateralized by USDC, to Data Stats. Christensen raised concerns about the asset’s dependence on USDC. However, Circle has demonstrated that it will comply with United States law regarding Tornado Cash.
DAI, currently the fourth-largest USD-pegged stablecoin crypto with a market cap of $7 Billion, is the 15th largest overall asset.
USDC support should be abandoned
After the call, Yearn.finance Core Developer bantg suggested MakerDAO was looking at converting all USDC from its Peg Stability Module into $3.5 billion Ether ( ETH). This would allow more than half of DAI to be backed by ETH. This is a huge jump from the current 7.3%.
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The community was critical of the idea. They compared MakerDAO to Terra, the beleaguered Terra project that aggressively bought Bitcoin ( Bitcoin) in order to back TerraUSD Classic (USTC), before it eventually collapsed.
Vitalik Buterin, Ethereum’s co-founder, also chimed.
This seems like a dangerous and horrible idea. The value of collateral could drop a lot if ETH falls, but CDPs wouldn’t get liquidated. This would put the entire system at risk of becoming a fractional reserve.
Christensen clarified later that he “wrote in maker governance discord that yoloing all stablecoin collateral into ETH was a bad idea.”
In the maker governance discord, I wrote that transferring all stablecoin collateral to ETH would be a bad idea kek
— Rune (@RuneKek)
August 11, 2022
He did confirm that a partial yolo could still be a good idea but he noted:
“I believe slowly DCAing some collateral into ETH can be an option depending on the severity the blacklisting risks, which I personally think are much greater after the TC Blacklist… It would exchange blacklist risk to depeg or haircut risk.”
